Water Rate Study 1952
CITY OF SALINA
KANSAS
WATER RATE REPORT
JUNE 1952
(152 - 49)
1rJILSON & C OHF ANY
- ENGINEERS -
SALINA -- KANSAS
JUNE 1952
(152-49 )
CITY OF SALINA
KA NSi~S
\rVATER RATE REPORT
if- * ~:- ~--- i{+ *
Ward Barcafer, Mayor
Carl Ramsey, Commissioner
Lloyd W. 'Price, 'Commissioner
Mrs. 'Ruth Cobb, Commissioner
R. W. King, Commissioner
Leland 11. Srack, Manager
Charles E. Banker, Clerk
Harold F. Harper, Engineer
C. L. Clark, Attorney
~i' ~~- {} ~} ~- *
WILSON & CruqpANY
- ENGINEERS -
SALINA -- KANSAS
REPORT ON WATER RATES
FOR THE
CITY OF SALINA, KANSAS
INDEX
Page
SECTION 1 - GENERAL INFOR1~TION
1.
2.
3.
Purpose of Report . . . . . . . . .
Reason for Revised Water Rates
Trend in Population and Water Usage .
. . . .
1
1
3
SEC'I'ION 2 - BASIS FOR THE WATER RATE SCHEDULE
1. General. . . , . . . . . 0 . . . . . . . . . . . . 6
2. A.W.W.A. Recommendations on Rates . . . . . . . . . 6
3. Applying the A.W.W.A. Formula to Salina Conditions 7
SECTION 3 - AMOUNT OF RE~~UE REQUIRED
1. General. . . . . . . . . . .
2. Operation and Maintenance Expense
3. Depreciation (Replacements) . . .
4. Expenditures for Annual New Construction
5. Defense Housing Project. .
6. Bond Coverage . . . . . . . . . .
7. Bond and Interest Payments
B
8
9
10
11
11
12
SECTION 4 - SUJ~Y AND RECOMMENDATIONS
1. Summary. . , .
2. Recommendations
13
14
\
-A-
and that some upward revisions in the water rates are necessary. The
following is a tabulation of water rates in use in Salina since 1925:
Salina Water Rates in Cents per 100 Cubic Feet
1925~32 1932-36 1936-39 1939-44 1944 to
Present
Temp, Hat.(
1949-5:)
ExceE:s
( R~fund.'?
16.8rJ;
13.5p
10.6~
5.6~
Quantity Rate Rate Rate Rat.e Rate
First 3,000 Cu.Ft. 22-1/2~ 20~ 17-1/2~ 15~ 11-1/4i
Next 6,000 Cu.Ft. 18~ 15~ 15~ 12~ 9rj;
Next 6,000 Cu.Ft. 12rf; 10rj; lOt q~ 6-3/4rj;
Over 15,000 Cu.Ft. lO~ & 5~ 5~ 5~ 5~ 3-3/4rJ;
b. A second reason for the necessity of increasing the water rates is
the steady rise in the cost of material, labor and equiT'ment. The water works
dollar, like the grocery store dollar, does not buy nl~o.rlY as much cast iron
pipe, pumps, and chlorine as it did a few years ago. For this reason, prac-
tically all the cities in the United Statesh:lV8 found it necessary to increase
their water rates since the recent war, unless they already had excessively
high rates before the recent increase in costs.
c. A third necessity for higher rates is the large amount of improve-
ments that must be made to the water distribution system. During the years
prior to the recent war, there was a relatively small amount of large mains
installed, and during the war practically no material was available for new
construction. However, during the 27 years between 1925 and 1952 the popu-
lation of Salina increased over 50%, and the usage of water increased 400%.
The storage and pumping facilities were improved during those years, and
small mains were provided for new areas, but th~ greatly increased rates of
pumpage had to be forced through undersized mains. Also, the high mineral
content of the Salina water has been constantly coating the interior of the
mains and this further reduced their carrying capacities. As a result, in
several areas of the City, it has become impossible to deliver water with
-2-
the pressure required to p~:'ovide satisfactory domestic service '3.nd tJ in:.Jure
adequate fire protection. An engineering report was prepared in 1950,
describing the deficiencies in the distribution system, and outlining a
construction program to provide the necessary improvements. The principal
work involved is additional elevated storage, larger supply mains and
extensions to the distribution system as itemized later in this report.
The amount of revenue required to offset the increased costs mentioned
ab(',v~ will be discussed in detail later in this report.
3. Trend in Population and Water Usage. When establishing water rates, it
is necessary to anticipate the probable future demand for water. If the
amount of water used is constantly increasing, then the rates can be rather
close to the actual production costs, as the overall unit cost is reduced
slightly with increased output. Thi.s results from the fact that the over-
head and fixed costs remain rather constant at all rates of pumpage,3nd
only the pumping and chlorination costs vary almost directly vdth output.
The population of Salina has been increasing at a relatively uniform
rate for the past 50 years, but there is every indication that an accelerated
rate of increase will occur in the near future. The Curve (Plate I) on the
fOllo,ring page shows that the population has increased at a rate of about
4,000 persons every 10 years since 1900, which would make the estimated
population about 30,800 in 1962. H~lever, because of the reactivation of
Smoky Hill Air Force Base, a greater influx of population is expected through
1953, and we believe the population of the City in 1962 may be conservatively
estimated at 32,000.
The rate of water usage has been increasing even faster than the popu-
lation, because the average amount of water pumped per capita per day has
increased from 63 g~lons in 1926 to about 160 gallons in 1949. This
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increased use of water per capita per day is caused principally by air-
conditioning, more sanitary facilities, automatic dish washers and garbage
disposal units, and better kept lawns. The total amount of water pumped
per year increased from 411 million gallons in 1926 to 1,560 million gallons
in 1949. This information is sho~vn graphically on Plate II.
It is assumed that a similar rate of increase in water usage ,viII
continue in the future, and this should provide assurance that a proper
rate schecule established now should be adequate for the future, and it
might be possible to reduce the rate slightly within 10 years. The curve
indicates that the total annual pumpage ~vill increase to an estimated 2,400
million gallons and that the average cons11mption per capita will increase
to an estimated 195 gallons per day by 1962.
a. Faulty Meter Registration. When a water meter is new it is a very
accurate instrument, but as it becomes older it begins to run slow. This
is especially true in Salina where the water is minoralized and contains
iron and manganese, as these minerals form a coating on the interior of the
meter which retards its movement and results in a low reel.ding. The Water
Department has begun a program of reconditioning all water meters and
restoring them to near their original accuracy, which should reduce the
amount of unaccounted for water.
b. Free Water. Large quantities of water are given to other City
Departments each year, free of charge. During 1951 the amoVlnt of free
water has been estimated at 4% of all water pumped, and was distributed
about as follows:
Flu3hing Sewers and Flush Tanks . .
Washing Streets and Fighting Fires
Hydrant Flushing . . . .
Water used in City Parks .. . . .
7,476,000 gallons
. 1,700,000 gallons
. 5,100,000 gallons
.36,800,000 ~allons
Total Free Water Per Year
51,076,000 gallons
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Most water works authorities contend that the Water Works Department
should be operated on a strictly business basis, and all water used by both
private C'lstomers and the municipality should be paid for. However, in that
case, the General Fund of the City should be refunded by the Water Department.
for office rent, administrative and attorney costs, and possibly some city
taxes, and this would partially offset the charge for water. Also, it must
be realized that the domestic customers, who use ovsr 70% of the water in
Salina, are the same general group who get the most benefits from the parks
and sew~rs. Therefore, no real injustice is done, and bookkeeping is
simplified, if the cost of the free water given to the City is added to
the customers' water bills. If a few thousand dollars additional revenue
per year is needed in the Water Department at some future date, a charge
could then be made against the other City departments for free water.
.
-5-
SECTION 2
BASIS FOR THE WATER Ro\TE SCHEDULE
1. General. There are two principal factors to be determined when establish-
ing a rate base: First, the total amount of revenue required must be com-
puted, and second, a method of distributing these costs equitably over all
users must be devised.
The amount of revenue a water works should receive is the sum of the
costs of maintenance and operation, plus the esti~ated cost of improvements
and extensions, plus any depreciation allowance which may be included.
Having determined the gross total of income needed, the next problem
is to allocate this amount to the water customers on a basis that is fair
to both large and small users.
2. A.W.W.A. Recommendations on Rates. For many years the leading engineers
of this country have given a great deal of study to water rates and have
expressed numerous theories on the subject. The American Water Works
Association has attempted to analyze and evaluate the various theories
advanced and to develop a workable pattern or formula by which all water
works personnel could be guided in the preparation of water rate schedules.
The first really constructive work on this subject was done by A.W.W.A.
in 1923, and the recommendations made by them at that time have since then
been used extensively, but there were many pertinent questions in rate making
whi.ch were not settled at that time. Twenty-five years later, in 1948, the
Michigan Section of A.W.W.A. again undertook the study of water rates in an
attempt to clear up the questions not settled in 1923, and to analyze the
results of the previous recommendations. Since theBe two studies and reports
are by far the most thorough and logicil of any theories advanced, we have
used the A.W.W.A. recommendations, with minor adjustments, as the basis on
which to determine the Salina water rates.
-6-
3. Applying the A.W.W.A. Formula t~ Salina Conditions. The computations~~
are rather long and involved and are not included in this report, but the
figures are on file for inspection by anyone interested. The A.W.W.A.
formula, when applied to the conditions in Salina, shows that the present
water rates are well balanced, with the average intermediate rate about
twice the wholesale rate, and the domestic rate about three times the
wholesale rate. Therefore, in order to revise the present rates to provide
the increased revenue required it will not be necessary to unbalance the
present scale, but merely increase all rates, including the minimum charge
per month, by a definite percentage based on the additional income required.
The amount of increase necessary is determined in the follovdng section of
this report.
~~ Required in developing the A.W.W.A. formula.
-7-
SECTION :3
AMOUNT OF REVENUE REQUIRED
1. General. The rate structure for a municipally owned water works should
provide sufficient revenue to pay all operation and maintenance expense, pay
all debt requirements, and create and maintain a sufficient reserve to meet
all probable replacements, extensions and improvements. The proposed Salina
rate should provide sufficient revenue for the fol1owingt (1) Operation
and maintenance of existing facilities; (2) Depreciation; (3) Continuous
new construction; (4) Amortization of bonds issued for defense housing
facilities; (5) Bond coverage; and (6) Maintaining a reserve fund. These
will be discussed in this Section:
2. Operation and Maintenance Expense. The amount of funds required to
operate and maintain the water works facilities can best be determined by
studying the Water Department expenditures during recent years. From these
yearly expenditures we may predict the approximate costs for such expenses
for possibly ten years in the future, taking into consideration probable
increases in the cost of materials and salaries and the increased physical
size of the water works system.
The operation aad maintenance expense of the system, annually since
1926, and the predicted annual expense through the next ten years is shown
graphically by the curve "A" on Plate III, on the following page. In order
to show the relationship between operating expense and total pumpage, we
have also plotted curve liB" on the same graph, which shows the total annual
pumpage from the pumping station records. There is also a relationship
between operating expense and the total physical value of the system. This
is shown by Curve "C" on the same graph.
-8-
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LA TE III
The predict.ed total pumpage is based on the predicted population and
the predicted use per capita, as derived from Plates I and II.
Curves A, B and C show that, in a relative manner, the total operating
and maintenance expense changes have lagged behind the total pumpage changes
and are not immediately affected by years of abnormally low or high total
pumpage. Operating expense and total pump age will both increase, but we
expect the operating expense to increase at a greater rate than the total
pumpage increase, because of the tremendous increase of the physical size
and value of the system, as indic ated by Curve II C" . If, however, we will
have been proved too conservative in our prediction of the population
increase, it will mean that the City will pump and sell more water than
predicted without appreciably increasing the operation and maintenance
expense. Should this be the case, the total revenue derived from the sale
of water will be somewhat higher than anticipated.
3. Depreciation (Replacements). Private utilities always carry an item of
depreciation for the purpose of building up a reserve fund with which to
pay for replacements. 1funicipal Utilities have found it advisable, also,
to include a specified amount in the rate base to pay for mains, pumps and
other facilities which have to be replaced.
There 'will continue to be minor replacements in t.he existing water
works system. On the average, their cost will be in proportion to the total
value of the system.
The amount of depreciation to be placed on the existing facilities,
which have been paid for, depends somewhat upon the condHion of the system.
In the past, it has been the practice at Salina to use about 1% of the
estimated value of the fixed assets of the system as the annual depreciation
item. That percentage, VIh ich appearing to be somewhat low, has apparently
been satisfactory and vall be continued in establishing the new water rates.
-9-
The valuation of the water works system will increase each year as
new facilities are added to the system. The total value of the f:!xed assets
of the system, therefore, will be about $2,085,000.00 in 1962. (See Plate III
on the preceding page).
The amounts applied to depreciation each year for the next ten years
are shown in the table at the end of this section.
4. Expenditures for Annual New Construction. There will continuo to be a
certain amount of distribution system extensions and of reinforcing ma~~s
and facilities to be constructed each year.
The report on water pressures, submitted in 1950, explains the necessity
for larger transmission and distribution mains in portions of the City which
have insufficient water pressure at the present time to provide satisfactory
domestic service and insure adequate fire protection. The facilities
recommended in the report included additional storage and some 16-inch and
12-inch mains. The elevated storage and a part of these mains will now be
incorporated in the Defense Housing project, and a part has already been
constructed, leavin~ an average of approximately $30,000.00 in new construc-
tion annually for reinforcing mains.
During the past 11 years, 1941 through 1951, the City has spent an
average of $35,238.28 for extensions and reinforcing mains and facilities.
The annual expense for the War years, of course, was very low because of
the shortage of materials. The annual expense for the period since the
1mr was very high, because of the "catching-upll that needed to be done.
Due to the increased cost of materials since the war, it would appear
that the cost for ~ew extensions in future years will be somewhat higher
than in the past. Therefore, we b91ieve that about $20,000.00 should be
provided each year for the construction of new service mains to new develop-
ments, and about ~30,0'J0.OO for reinforcing ma.1ns and larger arteries, making
an annual total of $50,000.00 for continuous new construction.
-10-
~. Defense Housing Project. The immedi.:lte problem confronting the City is
the need for feeder and distribllt.:i.~ mains and facilities for the Defense
Housing project west of Highway 81 Bypass. This project, in itself, will
require the expenditure of approximately $258,300.00 for distribution and
feeder mains, hydrants and valves. This expenditure will require the issu-
ance of revenue bonds since the present water department funds are inadequate.
In order to be able to supply adequate amounts of water to the project
area without upsetting the balance of the remainder of the system, it will
be necessary to include with the Defense Housing project approximately
$91,845.00 worth of l6-inch and l2-inch feeder mains as recommended in the
1950 report; the 500,OOO-gallon elevated tank in the south or southwest
portion of the City, costing about $98,000.00; two new water supply wells
costing about $22,000.00; approximately 1000 water meters, costing $26,000.00;
and a new high service pump costing $15,000.00.
The totai expenditures outlined above will amount to $511,145.00. Part
of the feeder mains, distribution mains and meters will be required this year.
The remainder, and the elevated tank, wells and pump will be required before
the end of 1953. It is estimated that funds should be available to pay for
$300,000.00 of the work in 1952, and the remaining $211,145.00 in 1953.
6. Bond Coverage. In order to insure against insufficient funds being
available to meet the City's Revenue Bond payments during a particularly
unusual year in which the water revenues may be low or the operating expenses
high, or both, it would be advisable to set up a reserve connnonly known as
"Bond Coverage". The amount of this fund need not be large and it is esti-
mated that an amount equal to 5 percent of the outstanding bonds will be
adequate. The surplus in the fund each year ca'1 be used to help retire the
principal the following year, or can be allowed to accumulate as surplus.
-11-
7. Bond and Interest Payment.!. Tables I and II on the following pages,
present a s~~nar,y of all receipts and expenditures of the Water Department
during the Amortization p:')riod of the Bond issue. Table I pertains to a
10-year bond issue and Table II a 5-year bond issue. The basic information
regarding receipts and expenditures is derived as explained earlier in the
report.
The water fund reserve, amounting to approximately :1;;100,000.00, will
be maintained at that figure throughout the amortization period.
T~e tables indicate that a 125 percent increase in the present rate
structure, taking effect on 1 August 1952, 'will provide sufficient revenue,
to retire revenue bonds issued on a 10-year basis. A 150 percent increase
in rates will be required to retire 5-year bonds.
Interest payments for the 5-year bond :is sue ,,,ill amount to a total of
approximately $24,345.00; for the 10-year bond issue, approximately $49,080.00.
These figures are based on an average interest rate of 2 percent annually.
-12-
't
'~..,
fABLI I
S t1J&AiY 0' DOIIPTS AJU) IXPBIDITURIS
lo-YEAR. BOlD !SSUI
(Bate IDcrease 125%)
Jan-July i l
1931 1952 1952 1953 1954 1955 1956 1951 1958 1959 1960 1961 19t2
1. Total Opera tiJJg ixpmae . 82,269.36 . . 92,000.00 I 97.000.00 1100,750.00 '104,000000 1101.000.00 '110 .5~OO '113,000.00 '115,000.00 1111,000.00 t1l8.500.00 $120,000000
2. Depreo1atlon - 15~151.20 15,875.00 16.150.00 18.450.00 18,750.00 19,050000 19,;50.00 19,650.00 19,950.00 20,250000 20.550.00 20,850.00
:5. Continuous In Oonatruo-
tion 6$,946.", ;0,000.00 ;0,000000 50.~)Q.OO 50,000.00 ;0,000.00 50,000.00 50,000.00 50,000.00 50,000.00 50,000000 50.000.00
4. Sub-total, Expenditure. 166,366.63 151,815 .00 165,1;0.00 169,200.00 112,750.00 176,030.00 119,650.00 182,650.00 184,950.00 187.250.00 189.050.00 190,850000
5. Defense Rousing laoili-
tie. ~,OOO.OO 211,145.00
6. Total ExpeIlditure.,
Columna 4 & 5 . 457,819 .00 372.295.00
7. Present B'und.. .lwilab1e
(Cash 01" Materials) 100,000000
8. Water Rewnuea (Total) 90,6;0.00 79.500.00 203,300.00 210,000.00 214,600000 221,600.00 228,250.00 233,250.00 240.000.00 245,800.00 ' 250,000000 254,000000
9. Surplus (o~,!I)tfiolt) (167,725.00) (168,995.00) 40.800.00 41,6,50.00 45,550.00 48,400.00 50,~.OO 55 ,050.00 58,550.00 60.950000 6;,915.00
10. Bond 00'98l'&g8 (5%) 9,400.00 18,400.00 19,100.00 17,600.00 1;,700000 13,700.00 11,400.00 9,000000 6,300000 3,400000 - none -
,
11. Sub-total 1W , 125 .00 1S7.395 000 21,100.00 24,2;0000 29,850.00 34,700000 }9,2oo.oo 46,0;0.00 52.250000 57.550.00 63,915000
12. Interest 1,640000 7,720.00 7,380000 1,060000 6,290.00 ,,470000 4,570.00 3.600.00 2,500.00 1,350000 100.00
..
13. .A:Ilount ot Bond Issue 198,765.00 195,115000
14. Surplus tor Retirement
ot Bonda 13,2Z0.00 11.190.00 23,,60.00 29,230.00 ;4,630.00 42,450.00 490750.00 56,200.00 6; ,B15 .00
150 Plus Previous Bond
Coverage Re'8rTe ~, l)().CX'> 21,100000 11,600000 15,100000 13,700.00 11.400000 9,000.00 6,,00000 3,400.00
16. Total Retirement of
Principal 41,')20.00 38,290000 41,160.00 44,930.00 48,330.00 53,850.00 ;8,150.00 62,500.00 67,215000
170 Amount ot Bonds Outstanding 198,765.00 393,880.00 352, ".0.00 314.570.00 273,410.00 226,~O.OO 180,165.00 126,335000 67,585.00 5,085000 - none -
TABLE II
StlOlARY OF RECBIPTS AND EXPDDI'l'URES
5-YBAR BO~ID'ISSUl
(Bate InorealJe 15"")
Jan-July
1951 1952 1952 1953 1954 1955 1956 1957
16 Total Operating Exp'3n8e . 82.269.~6 . . 92.000.00 . 97 ,000.00 $100,750.00 .1~,OOO.00 tl07,OOO.OO t110,500.oo
2. Depreciation 15,151.20 15,875.00 18,150000 18,450.00 18,750.00 19.050.00 19,350.00
3. Continuous Bew Constru.ction B3,946.vr 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00
4. Sub-total, Expenditures 166,366.63 157,875.00 1f?,150.oo 169,200.00 172,750.00 176,050.00 179.850.00
5. Detense Housing Facilities 300,000.00 211,145.00
..
6. Total Expenditures. Columns 4 & 5 457,875.00 372,295 .00
7. Present Funds A_iIable
(Cash or Jla.1;er1ala) 100,000.00
8. Wa'ter Revenues (Total) 90,650.00 95,400.00 244,000000 252,000.00 257,500.00 266,000.00 274,000.00
..j
9. Surplus (or Deficit) , . (:1:71..825.00 ) (128,2]5.00) 82,800.00 84,750.00 89,950.00 94,150.00
10. Bond Coverage 8,560.00 15,500.00 16,600.00 12.400.00 8,200<,00 - none -
11. Sub-total 180,395 .00 143,795 .00 66,200.00 72,,50.,00 81,750000 94.150000
12. Interest 1,505.00 6,500.00 6,600.00 4.970.00 3,300.00 1.470.00
13. Amourrt of Bond Iss us 181.890.00 150,29; .00
14. Surplus for Retirement of Bonds 59,600.00 67.380.00 78,450.00 92,680.00
15. Plus Previous 80m Coverage BSserve 24,060.00 16,600.00 12.400.00 8,200.00
16. 'total Retirement of Principal 83.660.00 83,960.00 90,850.00 108,880.00
170 Amount ot BomB Outstanding 181,890.00 332,185.00 248,525.00 U4.545.00 73,6g; .00 - none -
~
SECTION 4
SUMMtRY AND RECOMMENDATIONS -
_..-
1. Summary. The foregoing text has pointed out the following pertinent
information regarding Salina's water supply facilities:
a. Expenditures have exceeded revenues dudng the past 5 years, thereby
depleting the reserve funds.
b. The defense housing project will require the expenditure of approxi-
mately 1/2 million dollars during the next year and one half.
c. Construction of scheduled reinforcing mains and distribution mains
in new areas will require the expenditure of $50,000.00 annually.
d. The population of the City will increase to at least 32,000, and
the use of water per capita will increase to approximately 195 gallons per
day, by 1962.
e. The present water rate strncture is well bala.l1ced, but a flat
percentage increase will be required to retire revenue bonds and meet current
obligations of the Water Department.
f. Revenue Bonds must be issued to finance needed construction between
now and the end of 1953. If rates are increased sufficiently to retire the
bonds in 5 years, the total amount of the bond issue will be approximately
$332,000.00.
If rates are increased sufficiently to retire the bonds in 10 years J
the total amount of the bond issue will be approximately $39h,245.00.
-13-
2. Recommendations. The following water rates are recommended for the City
of Salina:
Present Rate Recommended Rate for
Retirement of 18-yr.
(Per 100 C.F.-1 Bonds (Per 100 C.F.)
First 3,000 Cu.Ft.
Next 6,000 eu.Ft.
Next 6,000 Cu.Ft.
All Above 15,000 Cu.Ft.
11. 25~
9. ~
6.75~
3.75~
14.0 ~
11. 251
8.5 1
4.7 1
Recommended Rate for
Retirement of 5-yr.
t;onds (Per 100 C.F.)
16.81
13.51
10.0~
5.61
The follovnng minimum monthly rates for each size of meter will apply;
Present Rate
Recommended Rate for
Retirement of 10-yr.
Bond
Size of
Meter
~/3"
3/4"
1 II
1-1/2"
2 "
3 II
4 "
6 "
$ 0.75
1.10
1.85
3.35
4.50
7.25
12.10
24.10
$ 0.93
1.37
2.31
4.20
5.60
9.00
15.15
30.15
Recommended Rate fo.l'
Retirement of 5-yr.
Bond
$ 1.13
1.66
2.75
5.00
6.75
10 .85
18.10
36.15
The amounts of water allowed for each size of meter to remain unchanged.
-14-